20 Retirement Planning Mistakes That Waste Your Money

Cashing Out Your 401ks Between Jobs

According to Fidelity Investments, the average cash-out amount of a person under 40 who is changing jobs is $14,300. Although cashing out your 401k might seem like a good idea if you need to solve a short-term financial crisis, doing so can have dire consequences.

For example, if you cash out or withdraw money from your 401k early — before age 59 1/2 — you could be hit with tax penalties. Along with any applicable federal and state income taxes, you could face a 10 percent early withdrawal penalty. Moreover, Fidelity reports that your 401k plan administrator will typically withhold 20 percent of your balance to cover the taxes.